Legal Updates: Court of Appeal upheld Letter of No Consent in Anti-Money Laundering

2023/10/20

In order to prevent the dissipation of suspicious funds, the Police and the Joint Financial Intelligence Unit have in the past been issuing “Letter of No Consent” (“ LNCs ”) under the Organized and Serious Crimes Ordinance (Cap. 455) (“ OSCO ”) to the banks notifying them to stop transactions in suspicious accounts. However, in the case of Tam Sze Leung & Others v. Commissioner of Police [2023] HKCA 537, the Court of First Instance of the High Court (“CFI”) ruled that the operation of the “Letter of No Consent Regime” (“Regime ”) was ultra vires, not prescribed by law and disproportionate. The Commissioner of Police appealed.

On 14th April, 2023, the Court of Appeal of the High Court (“CA”) handed down its judgment reversing the CFI’s decision and ruling that the LNCs was lawful and constitutional. The CA emphasized that the actual operation of freezing the accounts was a matter for the Banks to make their own independent judgments, rather than complying with the order of the Police, and such practice is not ultra vires. It was not improper for the police to refuse consent for the purpose of preventing dissipation of property during its ongoing investigation. The CA also held that there was no relevant vagueness and uncertainty in the OSCO. Although the police’s discretion under the OSCO is without specific parameters, there are sufficient constraints to guard against arbitrary refusal of grant of LNCs, and that there is sufficient guidance for an informed citizen to anticipate the scope of the discretion and the manner in which the Regime was to be operated.

The challenge of the Regime having never been prescribed by the law accordingly fails. Furthermore, in relation to proportionality, the CA reaffirmed the judgment in Interush Ltd v Commissioner of Police [2019] 1 HKLRD 892, and held that the Regime was not unconstitutional.

In light of the CA having reviewed the Regime and reaffirmed the legality of LNCs, it is likely that the Regime will continue to be operated in Hong Kong. With the significant increase in crimes of cyber fraud, it is anticipated the Regime shall assist the banks to stop suspicious customers’ transactions at the earliest opportunity, prevent the dissipation of the victims’ funds and further facilitate recovery of the dissipated funds.

This Article has been published in our firm’s 13th issue of Newsletter